Concepts and tools:
Boston Matrix
Product Life Cycle
Extension Strategies
Vocabulary: Branding: Refers to a name that is identifiable with a product of a particular business.
Tuesday March 18:
Cash flow example for Rony.
For Rony: Business Plans: What do you need for a business plan? How does it connect to everything else that we have learned? You fill in the blanks.
The Business:
The Product:
The Market:
The Fiance:
The People:
The Marketing:
Play some marketing review games. So know your stuff!
The Marketing unit consists of these topics:
Market and product orientation
What is a market?
Market share
Market planning
Unique Selling Point
4 Ps of Marketing
Market Research
Perception Maps
Target Markets
Branding
E-Commerce
Marketing terms:
Market: A place or process where the customers and suppliers trade goods and services.
Social Marketing: The planning and implementation of programs designed to bring about social change.
Commercial Marketing: The use of marketing strategies to meet the needs and wants of the customer in a profitable way.
Niche Marketing: Targets a well-defined market segment. (model trains)
Mass Marketing: Refers to undifferentiated marketing that ignores targeting individual market segments. This is to maximize sales volume. Coca-Cola is a good example.
Perception Map: A visual tool that tells customer perception of a product or a brand.
Unique Selling Point USP: What makes a brand, product or any aspect of a business, stand out from the competition.
Differentiation: The act of distinguishing a business or its products from competitors.
Cluster Sampling: Selecting several geographic areas and randomly interviewing them. The region is chosen at random and then the individuals are chosen at random. This is great for businesses that operate in many geographical areas. However, the cluster being sampled could have different or unique characteristics.
Random Sampling: Every member of the population has the same probability of being included in the sample. It is easy to obtain the sample but the target market is not always represented.
Stratified Sampling: Dividing the population up into different subgroups and then choosing individuals from those subgroups at random. (So start by dividing the population up into groups that are different.) This method is difficult to organize but gives more accuracy.
Quota Sampling: Most commonly used sampling method. A certain number of people from different market segments are selected. It is easy to obtain a sample and the findings are more reliable than random sampling. However, not all the people chosen are representative of the population.
Snowballing: Requesting referrals from the initial respondents so that you can reach the desired number of responses. There is bias in this method of sampling but is easy to obtain respondents.
Convenience: Individuals are selected on their availability. This has the most inaccurate and biased results so try to get as many responses as possible.
Larger concepts to understand.
Market and Product Orientation
Market Share: Formula and idea behind what it means to control the market or be the market leader.
Perception Map: How to use and why it is important.
What is a Market? What are different market segments?
What are different examples of a USP?
In what ways can you differentiate your business? Product? Brand?
What are the different Sampling methods and what are the drawbacks and benefits of each?
What are some Sampling errors that could be made when doing market research?
Market Research: What words come to mind when you think of it. What are the ethical implications of Market Research?
How to answer a CUEGIS question:
Introduction to the essay: This can have information about the company that you are talking about and the meaning of the 1 or 2 concepts that you are addressing.
The main body of the essay: This is 3 to 4 paragraphs.
Each paragraph should include:
Main point that connects to the concept.
Main point taht connects to teh content.
Stakeholder affected (could be an individual or group)
Supporting evidence
Conclusion
Summary of the main points along with an answer to the question.
You will be graded on these points: K Knowledge and conceptual understanding A Application of the tools and concepts R Reasoned arguments (balanced with specific examples) S Structure of your essay. (See above) E Individuals and Societies (Stakeholder that is affected. Can be individual or a group.)
30 CUEGIS questions:
Send me an email with any topics you would like to go over in class.
Unit 1 questions Business Organizations and Strategy. Make sure that you understand the topics that are explored along with the concepts.
Discuss the consequences of a change in any combination of the STEEPLE factors for an organizations objectives and strategy. With reference to one or two organizations that you have studied, discuss how ethics and change may influence organizational objectives. With reference to one or two organizations that you have studied, examine the role of innovation in possible growth strategies. With reference to one organization that you have studied, evaluate the impact of change and globalization on its growth. With reference to one or two organizations that you have studied, discuss ethical considerations and the changing role and nature of CSR. Discuss the role of ethics and innovation in the CSR of an organization that you have studied. With reference to one or two organizations that you have studied, discuss the need for organizations to change objectives and innovate in response to changes in the internal and external environments. With reference to a multinational company you have studied, examine how stakeholders have been impacted by change and globalization. With reference to one or two organizations that you have studied, discuss the role of culture and ethics in the growth and evolution of organizations. With reference to an organization, evaluate the importance of change and innovation when starting a business.
Unit 2 questions Human Resources. Make sure that you understand the topics that are explored along with the concepts.
With reference to one or two organizations that you have studied, discuss internal and external changes as factors that may influence human resource strategies. With reference to one or two organizations that you have studied, examine how culture and globalization have impacted the types of financial and non-financial rewards used. With reference to one or two organizations that you have studied, discuss the role of culture in outsourcing, off-shoring and re-shoring as human resource strategies. With reference to one or two organizations that you have studied, discuss how ethical considerations and cultural differences may influence leadership and management styles in an organization. With reference to one or two organizations that you have studied, discuss how change and strategy can influence how organizations my influence how organizations may attempt to increase employee motivation. With reference to one organization that you have studied, discuss how change and culture have impacted its labor turnover.
Unit 3 Questions Finance. Make sure that you understand the topics that are explored along with the concepts.
With reference to an organization, examine how ethics and globalization have impacted on its sources of finance. With reference to an organization, discuss how culture and ethics influence accounting practices in an organization. (I am weighing in here to let you know that this is dealing with the final accounts like balance sheets and income statements.) With reference to an organization, discuss how change may affect an organizations profitability ratios and the strategies available to improve these ratios. With reference to an organization, discuss how change may affect an organizations liquidity ratios and the strategies available to improve these ratios. With reference to an organization, discuss how cash flow can effect an organizations strategic response to globalization. With reference to one or two organizations you have studied, discuss how organizational culture and business ethics may have cash flow implications.
Unit 4 Questions Marketing. Make sure that you understand the topics that are explored along with the concepts.
With reference to an organization, discuss strategies associated with market share in response to changes in the external environment. With reference to an organization, discuss the implications of change and innovation on an organization's market share. Discuss the implications of cultural differences and globalization on the international marketing for an organization of your choice. With reference to an organization, discuss how ethics and culture influence the way firms target consumers in different markets. (target markets) With reference to an organization, discuss how innovation and culture can differentiate an organizations products and themselves from competitors. With reference to an organization, discuss the importance of innovation and ethics on marketing. With reference to an organization, discuss the importance of a unique selling point as a strategy in response to change. With reference to an organization, discuss how an organization can use market research to guide innovation and strategy. With reference to an organization, discuss how globalization can effect an organization's pricing strategy. With reference to an organization, discuss change and globalization considerations in an organization's branding. With reference to an organization, discuss changes in a products life cycle and possible extension strategies. With reference to an organization, discuss the impact of technological innovation on promotional strategies. (viral marketing, social medial marketing) With reference to an organization, discuss strategies and the role of innovation in e-commerce.
Unit 5 questions Operations.
With reference to an organization, examine the importance of innovation and globalization in operations management. With reference to an organization, discuss production methods in relation to business strategy and innovation. With reference to an organization, discuss globalization and strategy associated with an organization's location of production.
Why final accounts?
These accounts allow managers have better financial control and planning. Most of the time it is a legal requirement to make sure that there is transparency in how they use their money. Shareholders are interested in where their money was spent and what their return on investment is so that they can decide whether to continue to invest in the company. Employees want to see the financial accounts to see if they have job security. Managers use the final accounts to see if they are profitable or efficient along with using them to plan strategies. Competitors can compare their earnings to other rival firms to see if they are doing well. Governments can look to see if they are getting the correct tax payout. Financial lenders can see if the company is doing well before lending money. Suppliers can look to see if trade credit should be given. Potential investors can see if they want to invest.
Income statement practice.
The income statement or the profit and loss account is a financial statment of a firm's trading activities over a period of time, usually one year. The main purpose of the P&L statement is to show the profit or loss of a business during a particular trading period.
Profit: is the positive difference between a firm's revnues and its costs.
Revenue: the inflow of money from ordinary trading activites.
Costs: the outflow of money from a business due to its operations.
First section of a P&L statement is the trading account: This is the difference between the company's sales revenue and its cost of producing those products to sell. This shows the gross profit of a firm. Gross profit = Sales Revenue - Cost of Goods Sold**
A business can improve its gross profit by:
using cheaper suppliers
increasing its selling price
improved marketing strategies (this can also raise expenses)
The second section of a P&L statement is the profit statement:
Net profit is the surplus, if any, from sales revenues after all expenses are accounted for. Net profit = Gross profit - Expenses
Expenses: are the indirect (overheads) or fixed costs of production.
A business can improve its net profit by:
rent could be negotiated or the company could move to cheaper premises
reduce electricity bills
administration costs could be looked at and jobs could be combined or employ fewer people.
Then interest and taxes are shown as separate items on the P&L statement because both interest and tax rates change over time and are beyond the control of the business. Profit might be lower this year just because of interest and taxes and showing a number without these factors helps a business see year over year trends. Net profit after interest and tax would be the next number.
The final section of the P&L account is called the appopriation account. There are two parts of this account and show how the net profit after interest and tax is distributed. Dividends: The net profit after income and taxes that is distributed to the owners. The Board of Directors decideds this number. Retained profit: The net profit after income and taxes that is kept by the business for its own use and reinvested in the company to expand the business.
Cash flow forecast: a financial document that shows the expected movement of cash into and out of a business, per time period.
Cash inflows: come from sales revenues when customers pay for the products they have purchased or from payments made by debtors, interest from savings accounts, etc. Cash outflows: cash that leaves the business when bills and invoices are paid. example: rent, wages, taxes, inventory purchases. Net cash flow: difference between cash inflows and cash outflows per time period.
Why create a cash flow statement?
Banks and other lenders require a cash flow forecast to help them assess the financial health of the business if they are seeking external sources of finance.
They help managers anticipate potential liquidity problems.
They help with business planning.
Opening balance: the amount of cash at the beginning of a trading period. It will be the same as the closing amount from the last month. Closing balance = opening balance + net cash flow or the amount of cash at the end of a trading period.
What causes cash flow problems:
Overtrading: businesses expand too quickly without the resources to do so. (accepting more orders than it can fullfill)
Overborrowing
Overstocking
Poor credit control
Efficiency Ratio:
ROCE Return on capital employed. This ratio measures the financial performance of a firm compared wiht the amount of capital invested. It is an efficiency ratio and also a profitability ratio.
Net profit before interest and tax x 100
Capital employed
Capital employed = loan capital + share capital + retained profit (the sum of all internal and external sources of finance)
The higher the ROCE figure is the better it is for the business. Some people say that a 20% ROCE number is the target benchmark. Look at it this way: for every $100 invested in the business, a $20 profit is generated. Most people believe that the ROCE number should at least be larger than what someone could make from interest rates in a bank. Also, bank deposits are less risky so investors are definitely looking at this number to see if it is worth it to invest in a company.
This ratio can improve by increasing the net profit number.
Different Fixed assets that can be seen on a balance sheet:
Land
Office buildings, factories, premises
Machinery
Equipment
Vehicles
Furniture/Fixtures
Different current assets that can be seen on a balance sheet:
Cash
Debtors
Stock (Inventory)
Different Current Liabilities that might be seen on a balance sheet:
Line of credit from the bank that needs to be paid quickly
Any other short-term loans (overdraft)
Creditors (Trade Creditors)
Taxes
Dividends that have been issued but not paid
Different long-term liabilities that might be seen on a balance sheet:
mortgage payment
loan payment
bonds
debentures
Balance sheet review and new format:
Balance Sheet: Shows the net worth of the company on one date (usually the last day of the accounting year). It is the difference between what the company owns (assets) and what it owes (liabilities).
Assets: items of monetary value that are owned by a business. Fixed assets are used for business operations and are likely to last for more than 12 months. Current assets are cash or any other liquid asset that is likely to be turned into cash within 12 months of the balance sheet date.
Liabilities: a financial obligation of a business that is required to be paid in the future. Long-term liability: are debts that are due to be reaid after 12 months. Current liability is any debt that needs to be paid within one year of the balance sheet date.
Shareholders equity or owners equity (in a business other than a limited liability company): Total assets - Total liabilities = Net assets = shareholders equity.
Share capital: The total value of capital raised from shareholders by the issue of shares.
Retained earnings: these are the profits that are not paid out in dividends, but are reinvested back into the business and used to purchase additional assets. They are no longer available as a source of liquid funds.
Depreciation: the fall in the value of fixed assets over time due to wear and tear and obsolescence. In order to calculate the value of a business more accurately, subtract depreciation from the fixed assets on the balance sheet. (It will also show up on the income statement as an expense.)
Balace sheet example. It is upside down but I will print it for you...
Questions from today's quiz...
Explain 2 ways JAC/Utopia might benefit from e-commerce.
Using Maslow's theory of motivation, examine the factors that might affect the level of motivation at Utopia.
Discuss the importance of ecological, social and economic sustainability for Utopia. (triple bottom line)
Explain how ethical implications might influence leadership and management styles.
Identify 2 possible efferent methods of production for JAC.
Rony had a question on inflation... https://www.youtube.com/watch?v=Vi3Q1ypNw3M
Inflation: the continual rise in the level of prices in an economy. Most economists regard low and stable inflation as a prerequisite to achieving the other 3 government objectives, so it is an absolute priority for economic prosperity.
Deflation: the decrease in the level of prices in an economy.
Questions from the case study:
Explain the value of the Ansoff matrix as a strategic decision-making tool.
Using the Ansoff matrix as a framework, examine how market development in the Pacific Islands of Fiji, Samoa and New Zealand might bring competitive advantages to Utopia.
Discuss the impact of implementing ethical objectives at Utopia.
Explain the value of preparing a STEEPLE analysis for Utopia.
Explain how changes in any 2 factors on your STEEPLE analysis can impact a growth strategy.
Examine the impact that the external environment may have on Utopia's objectives and strategies.
Here is a document on all growth methods with definitions and pros and cons.
January 31: To do in class: PEST analysis and Marketing mix for Utopia.
January 24:
Vocabulary quiz.
Stakeholder profiles of the people involved.
Create a timeline of the business.
Create a SWOT analysis for the business.
January 18:
Key terms.
Descriptions of the stakeholders of the case.
SWOT analysis.
January 17:
Stakeholder analysis of yourself...
Start to look at the preseen case study UTOPIA.
1. Key terms
2. Stakeholder profiles
3. Time line for UTOPIA and JAC
January 11: Location: The geographical position of a business. This is one of the most important and most difficult strategic decisions for any business. Objective: Students will understand the reasons for a specific location of production.
Vocabulary: outsourcing/subcontracting: the practice of transferring internal business activities to an external organization to reduce costs and increase productivity. Examples include; office cleaning, accounting, security. offshoring: an extension of outsourcing which involves relocating business functions and processes overseas. This means that offshored functions can remain within the business (operating overseas) or outsourced to an overseas organization. If a business does outsource part of their operation to an overseas organization it is considered offshore outsourcing. insourcing: the use of an organization's own people and resources to accomplish a certain function or task which would otherwise have been outsourced.
Explain the pros and cons of La Paz's location decision. What factors do you think went into the decision of locating the school in Mar Vista?
Infrastructure:
Depending on the organization, access to roads, rail, air, and waterways fro the transportation of supplies and finished goods is a critical factor. In addition, most organizations will need quality and reliable communication network systems. (internet, phone)
Target customer:
Some organizations still need to be strategically located near their customers. However, with teh increase in e-commerce this has become less of an issue for many organizations.
Labor:
Depending on the organizations access to a highly trained workforce and/or access to an inexpensive workforce could be a key factor in deciding the location of production for a business.
Land:
Access to suitable and inexpensive land is a factor to consider for many business organizations. Some organizations will want to make sure that there is room for expansion while others would prefer to be located within an urban environment.
Suppliers:
The availability of a range of local, affordable suppliers is important.
Government:
Depending on the location, local government can provide assistance and favorable laws, taxes, incentives and policies to attract a business.
Management/Owner preference:
Many businesses choose a location where they have some local knowledge or have a strong network of contacts.
Ethical issues:
Organizations that produce noise or air pollution will need to choose their lcation wisely. In addition, some organizations perfer to locate their production facilities in their local country or town in order to create jobs and stimulate the local economy.
Competitors:
In some cases, managers would like to be near their competition to draw customers to a specific area and away from their competition. In other instances, managers would prefer to be located away from their competition in order to capitalize on a new market.
Assignment: Provide a brief description of one business that is of interest to you. Using the factors above, explain why that business has decided to locate there.
Vocabulary words: Capital-intensive - Manufacturing or providing a product relies heavily on machinery and equipment. Because of this, the cost of capital accounts for the largest proportion of the capital-intensive firm's overall production costs. Labor-intensive - In this case, the production process relies heavily on labor input, so that the cost of labor accounts fro the largest proportion of a firm's overall production costs. It is more apparent when providing personalized services.
Explain the most appropriate method of production for each product below:
a) Navy battleships
b) Wedding cakes
c) Cookies
d) Samsung smartphones
e) Evian bottled mineral water
Explain why it might not be easy to categorize the production method used to make the following products:
a) Dell personal computers that are "made to order".
b) Birthday cakes that are sold at large supermarkets such as Carrefour, Tesco and Walmart.
How does an organization's culture dictate the choice of production methods?
How has innovation changed the way things are being produced?
Why do many firms choose to use a combination of various methods of production?
Objective: To be able to describe and compare features and applications of the following production methods. To be able to analyze the implications for the business that arise from different production methods and finally to be able to analyze the most appropriate method of production for a given situation.
Job Production: Producing a one off specialty item designed for the customer.
Batch Production: Producing a limited number of identical products - each item in the batch passes through one stage of production before passing onto the next stage.
Mass Production: Producing large quanitties of a standardised product.
Mass Customization: The use of flexible computer-aided production systems to produce items that meet individual customer requirements at mass production cost levels.
Flow Production: Producing items in a continually moving process which can also be known as line production.
Cellular Production (manufacturing): Splitting flow production into self-contained groups that are responsible for whole work units.
Power point with advantages and disadvantages of each.
January 3: Look at pictures around the room and decide if they are ecological (environmental) or social sustainablility. Choose one that is negative and talk about the specific operations management strategies that are harming sustainability. Choose on that is positive and talk about the specific operations management strategies that are helping sustainability.
Sustainability: a concept that promotes intergenerational equity, example: production enables consumption of goods and services for the people of today without compromising the consumption for the people of tomorrow. It is about meeting the needs of the current generations in such a way that does not jeopardise the needs of future generations. (Paul Haong)
Ecological (Environmental) Sustainability: refers to the capacity of the natural environment to meet the needs of the current generations without jeopardizing the needs of the future generations. http://www.elquintopoder.cl/wp-content/uploads/2012/07/jurel2.jpg
Homework: Choose one company (hopefully your CUEGIS company) and discuss specific operations strategies that either help or harm sustainability.
With reference to one or two organizations, evaluate different operational strategies businesses can adopt to respond to issues of globalization or culture.
What are the operational strategies your company uses to control or ensure; quality, safety, sustainability, planning, research and development, method of production. First define these for your company.
Second define either globalization or culture.
How are they adapting to globalization?
How are they adapting either their internal culture or adapting to external cultures?
Jan. 2: Objective: To understand operations management and its relationship with other business functions and how it is intregral to organizations that produce goods and/or services.
Take a moment to write down the 3 functions of business that we have already studied. Then write how you think that operations interacts with them.
Operations management or production: Providing the right goods and services in the right quantities at the right quality in a cost-effective and timely manner. This has a direct impact on other functional areas of the organization. Or as others say: it is to create the highest efficiencies in producing goods and services for the organization.
Marketing - Because production can affect the quality and the uniqueness of a product it can also affect price, higher quality, different from other items in the market means higher pricing. Packaging, people and promotional strategies also play a role in marketing mix. So the two functions need to be on the same page. The marketing team needs to clearly undestand what the operations team CAN produce and the operations team needs to listen to the marketing team who is more connected to the customer.
Human Resources - The size of the workforce is impacted by operations. Production methods can change, countries and laws can change and the HR team needs to adapt. Motivation can be difficult in flow production and mass production because the work is monotonus. Whereas job production requires a different set of specialty workers that HR needs to be able to recruit.
Finance - Production can require heavy capital investment. This is expensive and can require external sources of finance and communication of when the investment will pay for itself by understanding capacity and other aspects of the investment. Some of the production methods require high labor forces and that will show on the income statement. Operations and Finance need to be on the same page for budgeting and accounting purposes.
Remember the 4 sectors of the economy? Operations is a part of each one. Discuss how converting inputs into outputs and adding value happens in each of the examples below:
Primary sector: extracting raw materials, harvesting crops and rearing animals
Secondary sector: turning natural resources into processed or finished goods clothing or consumer electronics
Tertiary sector: providing services to guests in the form of finace or healthcare
Quaternary sector: universities or IT companies
Now create a mind map with your ideas with size and timing of production and planning in mind. (Have materials ready for class in order to engage and make posters for the class.)
November 18: Homework. Your first draft of your IA is due Monday Jan. 28.
November 14: Ariel wanted to further explore financial ANALYSIS:
This is a great article about how to analyze financial reports. http://www.accountingtools.com/financial-statement-analysis
CASE STUDY today about income statements and how to analyze them.
Worked example for Rony:
i) 500
ii) 180
iii) 200
iv) 45
v) 120
I added a column on my chart and also figured out the percent change between the years.
How do you calculate percent change?
Take the difference between the two years. Then divide by the initial numbers. Then multiply by 100.
I also figured out GPM and NPM. Both of these ratios I can use to analyze a profit and loss statement.
With the percent change number I can now answer questions about the performance of the company.
Shareholders of Ahmed Educational books Ltd. may be please with the performance of the company because:
Gross Profit and Net Profit (after intrest and tax) have both increased by 11.1% and 5.2% respectively. Retained profit is going up by 10% and that is a great source of finance for the continuing growth of my business. I also have only increased my tax payment by 6.6% even though I have increased my sales, GP and NP.
On the other hand, shareholders of Ahmed Educational Books Ltd. might also have some worries about the performance of the business because:
Sales revenues increased but the Cost of Sales also has increased by the same amount. So there were no economies of scale utilized by my growing business. Dividends now are only 10% of profit after tax compared to 15% last year. This is a drop of 33.3%. There has been a new line item of debt interest of $10,000. (if you think in hundred of thousands) (This has limited my Net profit growth.) The gross profit margin has stayed at 60% even though my sales revenues are higher. The NPM has also remained at 40%.
Shareholders would also want to consider economic factors during these 2 years along with their corporate objectives, are they meeting them? They can also look at their competitors numbers.
Investment: purchase of an asset with the potential to yield future financial benefits.
Capital Expenditure or CAPEX for short: the money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.
Investment Appraisal: Techniques used to calculate the financial costs and benefits of an investment decision. (The different methods used to assess the risks involved in investment decision-making. The main methods of investment appraisal that we are going to study are:
Payback period: Refers to the amount of time needed to for an investment project to earn enough profit to repay the initial cost of the investment. The formula for calculating the PBP is:
PBP = Initial investment cost ($) Contribution per month ($)
Advantages
Disadvantages
The PBP is the simpleset and quickest method of investment appraisal;
therefore it is the most used.
Contribution per month is unlikely to be constant as demand is
prone to seasonal fluctuations so the PBP can take longer than the model shows.
It can be useful for firms with cash flow problems as they can identify
how long it would take for the cash to be recouped.
PBP focuses on time as teh key criterion for investment, rather than on profits.
It allows a firm to see whether it will break-even on the purchase of an
asset before it needs to be replaced. This can be important in the age
of technology.
It can encourage a short-term approach to investment as managers are
looking at the short-term benefits and not the potential long term gains.
The PBP period can be used to compare different investment project with
different costs by calculating the quickest PBP of each option.
PBP might not be highly suitable for some firms (airline manufacturers,
property developers)
It helps to assess projects which will yield a quick retrun for shareholders.
Calculations are prone to errors as it is difficult to accurately predict future cash flows.
Average Rate of Return: calculates the average profit on an investment as a percentage of the amount invested.
Total profit during project's lifespan ($) / number of years of project x 100 = ARR Initial amount invested
Because ARR is expressed as a percentage, it is easy to compare the return to other investment opportunities. (If two projects are predicted to yield the same ARR, then the relatively cheaper project might be more desirable given that it carries less financial risk.)
A weakness of ARR is that it ignores the timing of the cash inflows and therefore tends to create errors in forecasting. It also relies on the knowledge of how long a project or investment will be useful. (That might be a guess.)
Overtrading: When a business expands too quickly either by buying too many fixed assets before earning the money or accepting too many orders without the capacity to make the product.
Overborrowing: When a large proportion of the money raised for expansion or growth is through external sources of finance, the higher the cash outflow due to interest.
Overstocking: This means that a business holds too much stock because of ineffective stock control or belief that there will be growth that does not come.
Poor Credit Control: If a company offers their customers extended periods of credit. This makes the working cash flow cycle longer. There also could be a case where you offer businesses credit and they do not pay resulting in "bad debt".
Unforeseen changes: Unexpected change in demand for the product, machinery breakdowns, shipping issues or storms can temporarily cause cash flow issues.
Strategies used to deal with cash flow problems:
Reduce cash outflows:
Look for businesses that will give you better credit terms so that you do not have to pay immediately for their products.
Look for suppliers that offer the same quality materials for a better price.
Make sure to control your stock (inventory).
Reduce expenses. How can you reduce your overhead costs?
Lease rather than buy.
Improving cash inflows:
Tighter credit control: As a business, you can limit the credit that you give your customers.
Cash payments only. This has some drawbacks in that customers might prefer to buy from other businesses that do offer credit.
Change your pricing policy. You can cut prices in order to bring in more cash in the short term.
Improve the product portfolio. Provide a wider range of products increases sales revenue with products that complement each other. However, this requires more cash to produce the products and is not guaranteed to bring in more revenue.
Seeking alternative sources of finance:
Overdrafts
Selling fixed assets
Debt factoring
Government assistance
The above strategies are to be used for cash flow issues.
CASE STUDY
Oct. 26:
Cash Flow Forecast: A financial document that shows the expected movement of cash into and out of a business, per time period. It is based on 3 key concepts.
CASH INFLOWS: usually come from sales revenue when customers pay for the products that they have purchased. Cash inflow can also come from payments made by debtors, interest received from savings deposits, sale of fixed assets or rental income…
CASH OUTFLOWS: refers to the cash that leaves a business. (any bills that need to be paid) A cash flow forecast requires a detailed budget of expenses, which include payments to creditors, advertising, loan and interest repayments or dividends.
NET CASH FLOW: refers to the difference between cash inflows and cash outflows per time period. Ideally, net cash flow should be positive, although it is possible for a firm suffering from negative cash flow to survive temporarily.
Why do this? Banks require them. They help managers anticipate. They aid in business planning.
Start with the opening balance:
Then inflows
Total Cash Inflows
Outflows
Total Cash Outflows
Net cash flow: total cash inflow – total cash outflow
Closing balance.
CASH FLOW FORECAST
Study the cash flow forecast below to complete the missing values for a-e
Sept. ($)
Oct. ($)
Nov. ($)
Dec. ($)
Cash Sales
2,000
2,000
(d)
4,000
Stock Purchases
600
600
900
1,200
Rent
1,000
0
1,000
0
Other Costs
600
600
800
1,000
Opening Cash Balance
1,000
(c)
1,600
1,900
Net Cash Flow
(a)
800
300
1,800
Closing Cash Balance
(b)
1,600
1,900
(e)
Oct. 25: Go over the test.
Current Assets: the liquid resources belonging to a business that are expected to be turned into cash in the next 12 months. They are as follows:
Cash: Money that is held at the business or in the bank. Debtors: This refers to people or other organizations that owe money to the business as they have purchased goods on credit. Stock: This is the unsold supplies of the raw materials, work-in-progress, and finished goods.
Current Liabilities: the money that a business owes that needs to be repaid in the next twelve months.
Overdrafts: A short-term source of finance that needs to be repaid quickly because interest rates are usually high. Creditors: Suppliers need to be repaid for items that have been purchased on trade credit. Tax: taxes to the government are usually paid on a yearly basis.
Cash Flow Statement:
Some assumptions to start:
Cash is needed to pay for the daily running of the business. Cash is a current asset. It is the money that a business receives from a sales of goods and services.
Profit is the positive difference between sales revenue and its costs of production. When enough products are sold to pay for all the costs, the firm reaches the break-even point and anything above that point generates profits. Profit = Revenues - Costs
It is very important to understand that some businesses sell things on credit. So you can see the sales on the income statement but the cash has not come at the time of purchase. So profit is not the same as cash. Example: You sell $50,000 worth of goods in a month. 60% of your customers pay with cash so you receive $30,000 cash. The other 40% ($20,000) is not received until the end of the credit period.
Reasons for this to happen: poor credit control or profitable businesses try to expand too quickly, seasonal stresses on businesses that don't have cash at certain times of the year.
Liquidity = how easily a business can be turned into cash.
Evidence shows that insufficient cash flow is the single largest form of business failure. (not lack of profitability)
So CASH IS KING!
Objective: Students will understand the relationship between investment, profit and cash flow. Define working capital and explain the working capital cycle. Be able to prepare a cash flow forecast from given information and evaluate strategies for dealing with liquidity problems.
Working Cash Cycle: The interval between cash payments for costs of production and cash receipts from customers.
Creditors: A person or company to whom money is owed. Using cash or credit, the business purchases raw materials from suppliers. Purchasing supplies on credit gives a business some time to complete the next steps in the cycle without running out of cash. Stock: Raw materials are then converted to stock through production. Also known as inventory. Debtors: A person or company that owes a sum of money. Products are sold to customers. This can be done in cash but also done on credit.
1. Suggest where investment, cash flow, and profit would fit in our working capital cycle diagram.
2. Draw a new diagram to illustrate the relationship between investment, cash flow, and profit.
3. Analyze the relationship between investment, cash flow and profit for a specific business. (example: Amazon)
4. Comment on Amazon's strategy to minimize the length of their working capital cycle. Explain the advantages and disadvantages of this approach.
5. Identify a business that has a longer working capital cycle than Amazon. Explain the impact a longer working capital cycle has on the organization's ability to meet short-term financial obligations.
6. Explain the working capital cycle in terms of capital expenditure versus revenue expenditures. How do these different expenditures show up in our working capital diagram?
7. Compare and contrast three measures of liquidity - working capital, current ratio, and acid test.
8. Compare and contrast two measures of business success - profit and cash flow.
Oct. 18:
You teach me what you learned on Friday. Go over uses and limitations of financial ratios.
Go over uses and limitations of financial ratios.
Ratio analysis provides very useful data for many stakeholders that have an interest in the financial performance. USES
Employees and unions can use financial ratios to assess the likelihood of pay raises and job security. (profitability and liquidity ratios)
Managers and directors can use data to identify areas in their control that need to be improved. (profitability, efficiency, and liquidity ratios)
Managers and directors are sometimes given merit bonuses based on profitability, efficiency, and liquidity ratios.
Trade creditors will look at short-term liquidity ratios to make sure that the business (their customer) can pay them back.
Shareholders will look at ratios to assess the return on their investment and compare it to other investments that they could put their money into.
Financiers use ratios to see if a business has sufficient funds and profitability to repay any loans that they might approve. Liquidity
Local Community could look at the ratios to see if there are job opportunities or funding for a local project.
Ratio analysis also has some LIMITATIONS**.
These are historical figures. They do not indicate the current or future financial situations of a business. (They are giving an overall view of the health of the firm so you can infer the future...)
Changes in the external business environment can cause a change in the financial ratios without there being a change in the performance of the business. example: higher interest rates reduce profitability even though sales revenue has increased.
There is no universal way to report company accounts so different businesses many use different accounting policies so comparing companies are sometimes different.
Qualitative factors that affect a companies performance are totally ignored. example: staff motivation or customer perceptions of quality. Samsung right now, Chipotle in 2015...
Organizational objects are not the same across businesses and sometimes comparisons are not relevant.
EXAM TIP: Often in ratio analysis questions it is more important to consider what data are not given rather than just to examine the financial data provided. Good management decision-making considers a range of information, both quantitative and qualitative.
Different ways of using ratios:
Historical performance: same ratios compared year over year to see what are the trends.
Inter-firm comparisons: close rivals should be looked at to see the performance in the same market.
Nature of the business and the organizational objectives: for-profit companies have very different ratios than non-profit companies. Also firms that prioritize their social and ethical footprint might have lower profitability ratios.
The economy: make sure to know what the larger economy is doing as a company can still be performing efficiently but there is a change in the health of the economy.
Talk about IAs. Show me your research for your IAs.
Test on Friday over Balance sheet, Income Statement, Ratios.
Oct. 14: Ratio Analysis:
Purpose:
to see what a firm's financial position is: its short and long term liquidity.
assess a firm's financial performance. (it's ability to control expenses)
compare actual figures with projected figures
for strategy decisions
aid decision-making
Ratios are compared in 2 ways:
historical comparison comparing the same ratio in two different time periods
comparing the ratios of businesses in the same industry
Exam tip! When learning the different financial ratios, make sure that you understand the unit of measurement used. Make sure to not only know the formula but to also understand the meaning of the ratio used!
Profitability Ratios: Examine profit in relation to other figures. These numbers are interesting to managers, developers and investors because they show how well a firm has performed in financial terms.
Net Profit x 100 = Net Profit Margin Sales Revenue
This shows the percentage of sales turnover that is turned into net profit. A NPM ratio of 35% means that for every $100 of sales $35 is the net profit. This is the amount of profit that is left after all the production costs are accounted for.
The gross profit margin shows the value of gross profit as a percentage of sales revenue. This is expressed as a percentage. The higher GPM, the better it is for a business as gross profit goes towards paying its expenses.
How can you increase gross margin?
Efficiency Ratios: Show how well a firm's resources have been used, such as the amount of profit generated from the available capital used by the business.
Return on capital employed:
Net profit before interest and tax x 100 Capital employed
Capital employed = loan capital + share capital + retained profit
(loan capital is shown as long-term liabilities on the balance sheet)
Liquidity Ratios: look at the ability of a firm to pay its short term liabilities (how easy it is to pay off their debts). This helps banks and creditors assess the likelihood of getting their money that they are owed.
Current ratio: This pertains to a firm's liquid assets and short-term liabilities: it's working capital.
Current Assets Current Liabilities
As Ariel taught us last week, current ratios that are within 1.5-2.0 are desirable.
Acid test ratio: is similar to the current ratio except it ignores stock when measuring the short-term liquidity of a business
Current Assets - Stock Current Liabilities
Look at these businesses and find the different ratios in order to analyze the business.
Chipotle/Qudoba
And if there is time: Best Buy
Oct. 11:
Objective: Continue to look at balance sheets and understand how to read them and use the information to make an informed investor decision.
Balance sheet example for the IB Test (I realize it is upside down. I can't figure out how to make it right side up.)
Exam tip:
The main difference between the balance sheet of incorporated and unincorporated businesses is that share capital does not appear as part of their equity because the latter does not have shareholders. The majority of the examination questions will ask you to interpret the balance sheet of a limited liability company.
Limitations of balance sheets:
The balance sheet is a static document so can change from quarter to quarter due to normal business activity.
The figures are "book value" of the assets and sometimes the "market value" is different. There is not a clear breakdown of the companies assets so the information is not totally transparent.
Not all balance sheets look the same so sometimes it is difficult to compare companies even in the same market.
Intangible assets: Non-physical fixed assets that have the ability to earn revenue for a business.
Brand recognition and brand value. These help a company make money and therefore are an asset. Patents: These provide legal protection for inventors, preventing others from copying their creation for a fixed number of years. Copyright: These provide legal protection for the original artistic work of the creator. Anyone that wants to reproduce or modify the artist's work must first seek permission. Goodwill: This is the value of an organization's image and reputation. This is the sum of customer and staff loyalty and can provide a major completive edge for any business. Goodwill is an indefinite-lived intangible asset recorded on the acquirer's post-combination balance sheet that is not amortized but, rather, tested periodically for impairment. If the acquirer later writes down impaired goodwill, it is usually a sign that the business combination failed to meet expectations (e.g. Time Warner's troubled acquisition of AOL) and, consequently, implies overpayment for the acquired business and error in judgment by the acquirer. http://macabacus.com/accounting/purchase-price-allocation1
Registered Trademarks: distinctive signs that uniquely identify a brand, product or business.
Intangible assets do add value to the business, but there is uncertainty in how to place an accurate value on these assets.
Activity: Analyze Chipotle to see if it is a good investment.
Understand what is Chipotle by looking at company information http://chipotle.com
Oct. 7:
Objective: Students will be able to define, read and start to analyze a balance sheet of a publicly traded company.
Key terms
Balance Sheet: A document that records what the business is worth at one point in time. (it shows the balances of the various accounts on the last day of the reporting period) Assets are shown on top and liabilities on the bottom.
Assets: Items of monetary value that are owned by a business.
Current Assets: An item on the balance sheet that is either cash, a cash equivalent, or which can be converted to cash in one year.
Fixed Assets: An item on the balance sheet that cannot be converted into cash easily - most notably a company's property, factories, and equipment.
Liabilities: A financial obligation of a business that is required to pay in the future.
Assets = Equity + Liabilities
Shareholders' equity: Total value of assets less total value of liabilities.
Share Capital: The total value of capital raised from shareholders by the issue of shares.
Working Capital:The capital of a business that is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities.
What things are listed on this income statement? Why would they be important to the different stakeholders? (Investors, employees, management, suppliers, potential investors, competitors, etc.)
Would you invest in this company? Which lines on the report are you looking at? Decide what evidence brings you to the conclusion to buy the stock or to not buy the stock.
Homework:
Bring in an income statement and a balance sheet from the annual report or their 10-K of a company that you would like to study.
Usefulness of the income statement: Used to compare and measure the performance of a business over time. This statement will help us with ratios in a couple of weeks. Actual data can then be compared with planned data. Investors and banks look at these numbers in order to decide whether or not to invest in a company.
Sept. 26: Breakeven analysis case study.
Financial Accounts
Objective: Students will be able to define, read and analyze income statements of a publicly traded company.
Language objective: Income Statement (Profit and Loss Account), Profit, Gross Profit, Cost of Goods Sold, Net Profit
Profit and Loss Account: This statement shows the trading position of a business throughout a period of time.
Balance Sheet: Shows the assets and liabilities of a business at a particular point in time.
Opening activity: One minute question:
Nestlé is the world's largest food company, founded by Henri Nestlé in 1866. Many of the Swiss company's brands are internationally renowned, such as Kit Kat and Smarties (candy), Dreyer's (ice cream), Nescafé, Nestea and Perrier (beverages), Gerber (baby food products), and Maggi (seasonings and sauces). A huge proportion of Nestlé's revenues come from the sale of candy, a market also dominated by rivals such as Mars (with brands such as Snickers and M&Ms) and Cadbury's (which own brands such as Time Out, Créme Eggs and Dairy Milk). Nestlé is listed on the Swiss stock exchange in Zurich and employs more than 339,000 people worldwide. Since 1974, Nestlé has owned a large share in L'Oreal, the world's largest cosmetics company. (case study from Business Management, Paul Hoang)
5 objectives of the Association of Chartered Certified Accountants:
Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional Behavior
Profit and Loss Account: Main objective when using this tool is to see the profit and loss of a business during a particular trading period.
It will be important for us to address the following limitations of break-even analysis whenever we apply it:
No inventory (or stock). This model assumes that the quantity produced is the same as the quantity sold. We will learn more about production and stock control next year, but you can probably imagine that it is quite difficult to achieve an inventory of 0.
One product. This tool becomes quite challenging when considering multiple products. So, for this course we will only apply this tool for one product.
One price and one variable cost per unit. The total revenue and total cost lines are straight lines (i.e. linear) on the break-even analysis graph. This means that as quantity increases and decreases the price and variable cost per unit stay the same. In reality, businesses often experience economies of scale and diseconomies of scale and charge different prices for bulk orders, which would suggest a non-linear relationship.
Static tool. This is perhaps the most significant limitation. As we know, businesses operate in a dynamic environment where things are constantly changing (e.g. costs of production can quickly change and demand for a product can quickly change). This tool is only a snapshot of the current situation and would need to be adjusted to account for any changes in the situation (e.g., change in the costs and the price of a product).
Quantitative tool. This tool ignores any qualitative factors such as the labor, management, and competition involved. In general, it is always better to consider both qualitative and quantitative factors when planning and making business decisions.
Whereas money going out of the business is considered costs or expenses, money coming into the business is considered revenue. There are many different terms used to describe revenue (e.g. sales, sales revenue, sales turnover, and operational income), but businessdictionary.com defines revenue as: 'The income generated from the sale of goods or services, or any other use of capital or assets, associated with the main operations of an organization before any costs or expenses are deducted. Revenue is shown usually as the top item in an income (profit and loss) statement from which all charges, costs, and expenses are subtracted to arrive at net income.' Source Businessdictionary.com Revenue consists of cash and credit transactions and is recorded on the date the item was sold. In other words, revenue is recognized when the income is earned and not when it is received. Revenue for a given period of time is generally calculated through the following formula:
Revenue = Price X Quantity Sold
Graph showing revenue against output
A visual representation would look a lot like the variable cost graph. It would start from the origin, because without any products being sold, there is no revenue. The main difference is that the total revenue line would be stepper than the variable cost line. This is because the business would charge a price higher than the variable cost per unit.
Of course, organizations often sell multiple products at different prices, but this simple formula and graph is an important one to keep in mind to understand revenue and will be used when we cover break-even analysis later in the week.
Then: Answer the following questions using appropriate business terminology (e.g. direct/indirect costs, variable/fixed costs, revenue, etc.).
Identify the types of costs that airlines face
Identify the different ways airlines generate revenue
Analyze how airlines are changing their cost and revenue structure.
Sept. 14:
Conrad will present Mergers and Acquisitions
Introduction
Our first finance topic, 3.1 sources of finance, covered the various ways finance can be raised to cover expenditures. As you recall, some of the sources of finance were more appropriate for long-term expenses or capital expenditures (e.g. share and loan capital) while other sources of finance were more appropriate for short-term expenses or revenue expenditures (e.g. overdraft and trade credit). Beginning with this lesson, we start the next finance topic - 3.2 costs and revenues. Specifically, we will look more closely at the different types of costs businesses face.
We will classify the different types of costs faced by businesses. Specifically, we will categorize costs in two ways depending on if the costs vary directly with:
The level of output (i.e. level of products produced and sold)
The output level of a specific product or a department
The first way of categorizing costs leads to three distinct types - fixed, variable and semi-variable costs. It is helpful to categorize costs in this manner when performing break-even analysis, which we will learn about later this week.
Fixed Costs:
Fixed costs can be depicted visually by the graph displayed above.
Businessdictionary.com states that fixed costs are:
‘While in practice, all costs vary over time and no cost is a purely fixed cost, the concept of fixed costs is necessary in short term cost accounting. Organizations with high fixed costs are significantly different from those with high variable costs. This difference affects the financial structure of the organization as well as its pricing and profits.‘
Variable Costs
Variable costs can be depicted visually by the above graph. Businessdictionary.com states that variable costs are:
‘A periodic cost that varies in step with the output or the sales revenue of a company.
Companies with high variable costs are significantly different from those with high fixed costs. This difference affects the financial structure of the company as well as its pricing and profits‘
Semi-Variable Cost Businessdictionary.com states that semi-variable costs are:
‘Production cost (1) that remains fixed up to a certain volume, after which it becomes variable, (2) the total of which responds less than proportionately to changes in volume of activity, or (3) which has both a fixed cost element (such as monthly rental for a phone line) and a variable cost element.
In reality, most costs have both a fixed and variable element, thus making them semi-variable. Semi-variable costs are more difficult to depict visually, but one interpretation is shown above.
The second way of categorizing costs leads to two distinct types of costs - direct and indirect (or overheads) costs. It is helpful to categorize costs in this manner when preparing financial accounts (e.g. the profit and loss account), which we will cover later in this unit.
Direct Costs:
Businessdictionary.com states that direct costs are:
‘An expense that can be traced directly to (or identified with) a specific cost center or cost object such as a department, process, or product.
Direct costs are often variable costs, but not always. For example, raw materials used to make a specific product would be both a variable cost and a direct cost. In contrast, the salary of a human resources manager would be considered a fixed cost, as it does not vary in the short term. However, it would be considered a direct cost because it can be traced directly to the human resources department.‘
Indirect Costs:
Businessdictionary.com states that indirect costs (or overheads) are:
‘An expense (such as for advertising, computing, maintenance, security, supervision) incurred in joint usage and, therefore, difficult to assign to or identify with a specific cost object or cost center (department, function, program). Indirect costs are usually constant for a wide range of output, and are grouped under fixed costs.
Since it is often difficult to reduce costs directly related to the production of a product, overheads can be under great scrutiny from cost-conscious businesses.‘
Exercise: Suggest one example of a business cost (e.g. salaries, rent, utilities, raw materials, loan payments, taxes, etc.) that fit each of the following classifications. Make sure to include your reasoning.
What will the money be used for? (This will affect the time frame in which the financing is required.)
The Cost of finance: Interest, opportunity cost, the expense that the business will incur marketing the share or bond sales.
Legal structure and desire to retain control of the company.
Size of existing borrowing. If a company has already borrowed large sums of money, investors get nervous about loaning them more.
Amount Required
Flexibility. If it is a seasonal business and there is the ability to use more flexible sources of finance it is better than being locked into long-term loans.
Scenario 1: New Property
Mark Jennings is a plumber who has been working from home for the last 2 years in order to save some of his profits. Now he would like to buy a property with plenty of storage and office space to help grow his business and hire 2 employees.
Scenario 2: New Computer Network
Hinton Ltd specializes in producing designer t-shirts and has decided to upgrade the current computer network within her offices in Manchester. She estimates that the cost of a new computer network will be $30,000 and would like to upgrade this system every 3 years.
Scenario 3: Starting up a new Fruit and Vegetable shop
Mike Randall has just been made redundant from a major high-end retailer. He has received a redundancy payment of $50,000 and would like to set up an organic fruit and vegetable shop in Didsbury.
Scenario 4: Growing t-shirt business.
Just in Time went to a trade show and received prebooked orders for 40,000 computer cases. They don't have enough funds to buy the materials to produce the t-shirts.
Scenario 5: Bicycles galore
A publicly traded electric bicycle company has a new design and needs to build a factory that can produce half a million bicycles a year and needs $50 million to build the factory.
EXAM TIPS Do not assume that all profitable businesses have cash on hand to fund future projects. Sometimes profits have already been used for other upgrades or might be owed to banks or shareholders in that moment. Do not make the mistake of suggesting that selling shares is an internal form of internal finance. Although the shareholders own the business, the company is a separate legal entity and therefore the shareholders are outside of the company.
Crowdfunding (example Kickstarter) It is a source of finance where you raise money through small donations by large amounts of people on the internet. You can also to get invaluable feedback on your product.
Types of Costs
Remember that Cost refers to the cost of production. Price is the amount that the product is sold for.
Fixed Costs
Variable Costs
Semi-Variable Costs
Direct Costs
Indirect Costs
Sept. 6:
Discuss article and discuss sources of finance found in the text.
Finalize sources of finance discussion and take Sources of Finance Scenario test.
There will be scenarios that will explain the type of company and the why they need the money. You will need to tell me what source of finance you would recommend and why.
Have you heard the phrase ‘It takes money to make money.’? The first aspect of finance we will consider is the different ways businesses can acquire finance to run their business. There is a list of various sources of finance that is located below that we will need to become familiar with. This is the goal of the google docs activity that we will do today.
You will also need to be able to determine which source of finance is best for a given situation. This will require you to consider the specific circumstances of the situation and relate it to the advantages and disadvantages of the different sources of finance. The discussion activity which you will complete will outline how we will help each other develop this skill.
For this activity, we are going to pool our collective genius and complete a google presentation as a class by following the instructions below. Choose three of the following sources of finance or one of the expenditures from the following list:
Capital Expenditure
Revenue Expenditure
Personal funds (for sole traders)
Retained profit
Sale of assets
Share capital
Loan capital
Overdrafts
Trade credit
Grants
Subsidies
Debt factoring
Leasing
Venture capital
Business angels
We will create a google slide share about these terms. With your term you must include:
Define each term and explain how each term is a source of finance for a business
Explain the advantages/disadvantages of each source
Suggest an example when this might be used. For example, consider whether the source of finance is appropriate for short or long-term needs.
Cite your source.
Short term finance-This is for any kind of finance that needs to be repaid within a year. (12 months)
Medium term finance- This needs to be repaid within the timeframe of 12 months and 5 years.
Long term finance- This type of finance refers to any period of five years or longer. (Long term loans, debentures.)
Choose a tool or theory that we learned about last year that you believe that you will use in your IA and prepare a short lesson plan for the class.
Content objective: The other students in the class will be able to use your tool in the correct manner when preparing strategy for future decisions.
Language objective: During your lesson, the other students will read, write and speak with other students about the tool.
Will have a visual for the other classmates to see and use.
Will have a check for understanding at the end of the class.
Today I will teach about mission and vision statements.
Vocabulary objective: Mission Statement: A simple declaration of the underlying purpose of an organization's existence and its core values. (What is our business?)
Vision Statement: An outline of an organization's aspirations (where it wants to be) in the distant future.
Look at the Vision and Mission Statements that have been posted around the room. Please get up and read them.
Choose one that resonates with you.
Write: Why did you choose this mission/vision statement? What words stood out to you in the text? Why?
Talk about your ideas with your partner. Then we will share as a class.
Do you think that the existence of a mission statement or visions statement influences your company's performance? If so, why?
Now think of your favorite company/brand. What is their mission statement? Is the company guided by their mission statement? Why or why not? What is your proof?
Concepts and tools:
Boston Matrix
Product Life Cycle
Extension Strategies
Vocabulary:
Branding: Refers to a name that is identifiable with a product of a particular business.
Tuesday March 18:
Cash flow example for Rony.
For Rony: Business Plans: What do you need for a business plan? How does it connect to everything else that we have learned? You fill in the blanks.
The Business:
The Product:
The Market:
The Fiance:
The People:
The Marketing:
Play some marketing review games. So know your stuff!
The Marketing unit consists of these topics:
Market and product orientation
What is a market?
Market share
Market planning
Unique Selling Point
4 Ps of Marketing
Market Research
Perception Maps
Target Markets
Branding
E-Commerce
Marketing terms:
Market: A place or process where the customers and suppliers trade goods and services.
Social Marketing: The planning and implementation of programs designed to bring about social change.
Commercial Marketing: The use of marketing strategies to meet the needs and wants of the customer in a profitable way.
Niche Marketing: Targets a well-defined market segment. (model trains)
Mass Marketing: Refers to undifferentiated marketing that ignores targeting individual market segments. This is to maximize sales volume. Coca-Cola is a good example.
Perception Map: A visual tool that tells customer perception of a product or a brand.
Unique Selling Point USP: What makes a brand, product or any aspect of a business, stand out from the competition.
Differentiation: The act of distinguishing a business or its products from competitors.
Cluster Sampling: Selecting several geographic areas and randomly interviewing them. The region is chosen at random and then the individuals are chosen at random. This is great for businesses that operate in many geographical areas. However, the cluster being sampled could have different or unique characteristics.
Random Sampling: Every member of the population has the same probability of being included in the sample. It is easy to obtain the sample but the target market is not always represented.
Stratified Sampling: Dividing the population up into different subgroups and then choosing individuals from those subgroups at random. (So start by dividing the population up into groups that are different.) This method is difficult to organize but gives more accuracy.
Quota Sampling: Most commonly used sampling method. A certain number of people from different market segments are selected. It is easy to obtain a sample and the findings are more reliable than random sampling. However, not all the people chosen are representative of the population.
Snowballing: Requesting referrals from the initial respondents so that you can reach the desired number of responses. There is bias in this method of sampling but is easy to obtain respondents.
Convenience: Individuals are selected on their availability. This has the most inaccurate and biased results so try to get as many responses as possible.
Larger concepts to understand.
Market and Product Orientation
Market Share: Formula and idea behind what it means to control the market or be the market leader.
Perception Map: How to use and why it is important.
What is a Market? What are different market segments?
What are different examples of a USP?
In what ways can you differentiate your business? Product? Brand?
What are the different Sampling methods and what are the drawbacks and benefits of each?
What are some Sampling errors that could be made when doing market research?
Market Research: What words come to mind when you think of it. What are the ethical implications of Market Research?
How to answer a CUEGIS question:
- Introduction to the essay: This can have information about the company that you are talking about and the meaning of the 1 or 2 concepts that you are addressing.
- The main body of the essay: This is 3 to 4 paragraphs.
Each paragraph should include:Main point that connects to the concept.
Main point taht connects to teh content.
Stakeholder affected (could be an individual or group)
Supporting evidence
- Conclusion
Summary of the main points along with an answer to the question.You will be graded on these points:
K Knowledge and conceptual understanding
A Application of the tools and concepts
R Reasoned arguments (balanced with specific examples)
S Structure of your essay. (See above)
E Individuals and Societies (Stakeholder that is affected. Can be individual or a group.)
30 CUEGIS questions:
Send me an email with any topics you would like to go over in class.
Unit 1 questions Business Organizations and Strategy. Make sure that you understand the topics that are explored along with the concepts.
Discuss the consequences of a change in any combination of the STEEPLE factors for an organizations objectives and strategy.
With reference to one or two organizations that you have studied, discuss how ethics and change may influence organizational objectives.
With reference to one or two organizations that you have studied, examine the role of innovation in possible growth strategies.
With reference to one organization that you have studied, evaluate the impact of change and globalization on its growth.
With reference to one or two organizations that you have studied, discuss ethical considerations and the changing role and nature of CSR.
Discuss the role of ethics and innovation in the CSR of an organization that you have studied.
With reference to one or two organizations that you have studied, discuss the need for organizations to change objectives and innovate in response to changes in the internal and external environments.
With reference to a multinational company you have studied, examine how stakeholders have been impacted by change and globalization.
With reference to one or two organizations that you have studied, discuss the role of culture and ethics in the growth and evolution of organizations.
With reference to an organization, evaluate the importance of change and innovation when starting a business.
Unit 2 questions Human Resources. Make sure that you understand the topics that are explored along with the concepts.
With reference to one or two organizations that you have studied, discuss internal and external changes as factors that may influence human resource strategies.
With reference to one or two organizations that you have studied, examine how culture and globalization have impacted the types of financial and non-financial rewards used.
With reference to one or two organizations that you have studied, discuss the role of culture in outsourcing, off-shoring and re-shoring as human resource strategies.
With reference to one or two organizations that you have studied, discuss how ethical considerations and cultural differences may influence leadership and management styles in an organization.
With reference to one or two organizations that you have studied, discuss how change and strategy can influence how organizations my influence how organizations may attempt to increase employee motivation.
With reference to one organization that you have studied, discuss how change and culture have impacted its labor turnover.
Unit 3 Questions Finance. Make sure that you understand the topics that are explored along with the concepts.
With reference to an organization, examine how ethics and globalization have impacted on its sources of finance.
With reference to an organization, discuss how culture and ethics influence accounting practices in an organization. (I am weighing in here to let you know that this is dealing with the final accounts like balance sheets and income statements.)
With reference to an organization, discuss how change may affect an organizations profitability ratios and the strategies available to improve these ratios.
With reference to an organization, discuss how change may affect an organizations liquidity ratios and the strategies available to improve these ratios.
With reference to an organization, discuss how cash flow can effect an organizations strategic response to globalization.
With reference to one or two organizations you have studied, discuss how organizational culture and business ethics may have cash flow implications.
Unit 4 Questions Marketing. Make sure that you understand the topics that are explored along with the concepts.
With reference to an organization, discuss strategies associated with market share in response to changes in the external environment.
With reference to an organization, discuss the implications of change and innovation on an organization's market share.
Discuss the implications of cultural differences and globalization on the international marketing for an organization of your choice.
With reference to an organization, discuss how ethics and culture influence the way firms target consumers in different markets. (target markets)
With reference to an organization, discuss how innovation and culture can differentiate an organizations products and themselves from competitors.
With reference to an organization, discuss the importance of innovation and ethics on marketing.
With reference to an organization, discuss the importance of a unique selling point as a strategy in response to change.
With reference to an organization, discuss how an organization can use market research to guide innovation and strategy.
With reference to an organization, discuss how globalization can effect an organization's pricing strategy.
With reference to an organization, discuss change and globalization considerations in an organization's branding.
With reference to an organization, discuss changes in a products life cycle and possible extension strategies.
With reference to an organization, discuss the impact of technological innovation on promotional strategies. (viral marketing, social medial marketing)
With reference to an organization, discuss strategies and the role of innovation in e-commerce.
Unit 5 questions Operations.
With reference to an organization, examine the importance of innovation and globalization in operations management.
With reference to an organization, discuss production methods in relation to business strategy and innovation.
With reference to an organization, discuss globalization and strategy associated with an organization's location of production.
Why final accounts?
These accounts allow managers have better financial control and planning. Most of the time it is a legal requirement to make sure that there is transparency in how they use their money. Shareholders are interested in where their money was spent and what their return on investment is so that they can decide whether to continue to invest in the company. Employees want to see the financial accounts to see if they have job security. Managers use the final accounts to see if they are profitable or efficient along with using them to plan strategies. Competitors can compare their earnings to other rival firms to see if they are doing well. Governments can look to see if they are getting the correct tax payout. Financial lenders can see if the company is doing well before lending money. Suppliers can look to see if trade credit should be given. Potential investors can see if they want to invest.
Income statement practice.
The income statement or the profit and loss account is a financial statment of a firm's trading activities over a period of time, usually one year. The main purpose of the P&L statement is to show the profit or loss of a business during a particular trading period.
Profit: is the positive difference between a firm's revnues and its costs.
Revenue: the inflow of money from ordinary trading activites.
Costs: the outflow of money from a business due to its operations.
First section of a P&L statement is the trading account:
This is the difference between the company's sales revenue and its cost of producing those products to sell.
This shows the gross profit of a firm. Gross profit = Sales Revenue - Cost of Goods Sold**
A business can improve its gross profit by:
The second section of a P&L statement is the profit statement:
Net profit is the surplus, if any, from sales revenues after all expenses are accounted for.
Net profit = Gross profit - Expenses
Expenses: are the indirect (overheads) or fixed costs of production.
A business can improve its net profit by:
Then interest and taxes are shown as separate items on the P&L statement because both interest and tax rates change over time and are beyond the control of the business. Profit might be lower this year just because of interest and taxes and showing a number without these factors helps a business see year over year trends. Net profit after interest and tax would be the next number.
The final section of the P&L account is called the appopriation account. There are two parts of this account and show how the net profit after interest and tax is distributed.
Dividends: The net profit after income and taxes that is distributed to the owners. The Board of Directors decideds this number.
Retained profit: The net profit after income and taxes that is kept by the business for its own use and reinvested in the company to expand the business.
Cash flow forecast: a financial document that shows the expected movement of cash into and out of a business, per time period.
Cash inflows: come from sales revenues when customers pay for the products they have purchased or from payments made by debtors, interest from savings accounts, etc.
Cash outflows: cash that leaves the business when bills and invoices are paid. example: rent, wages, taxes, inventory purchases.
Net cash flow: difference between cash inflows and cash outflows per time period.
Why create a cash flow statement?
Opening balance: the amount of cash at the beginning of a trading period. It will be the same as the closing amount from the last month.
Closing balance = opening balance + net cash flow or the amount of cash at the end of a trading period.
What causes cash flow problems:
Overtrading: businesses expand too quickly without the resources to do so. (accepting more orders than it can fullfill)
Overborrowing
Overstocking
Poor credit control
Efficiency Ratio:
ROCE Return on capital employed. This ratio measures the financial performance of a firm compared wiht the amount of capital invested. It is an efficiency ratio and also a profitability ratio.
Net profit before interest and tax x 100
Capital employed
Capital employed = loan capital + share capital + retained profit (the sum of all internal and external sources of finance)
The higher the ROCE figure is the better it is for the business. Some people say that a 20% ROCE number is the target benchmark. Look at it this way: for every $100 invested in the business, a $20 profit is generated. Most people believe that the ROCE number should at least be larger than what someone could make from interest rates in a bank. Also, bank deposits are less risky so investors are definitely looking at this number to see if it is worth it to invest in a company.
This ratio can improve by increasing the net profit number.
Different Fixed assets that can be seen on a balance sheet:
Land
Office buildings, factories, premises
Machinery
Equipment
Vehicles
Furniture/Fixtures
Different current assets that can be seen on a balance sheet:
Cash
Debtors
Stock (Inventory)
Different Current Liabilities that might be seen on a balance sheet:
Line of credit from the bank that needs to be paid quickly
Any other short-term loans (overdraft)
Creditors (Trade Creditors)
Taxes
Dividends that have been issued but not paid
Different long-term liabilities that might be seen on a balance sheet:
mortgage payment
loan payment
bonds
debentures
Balance sheet review and new format:
Balance Sheet: Shows the net worth of the company on one date (usually the last day of the accounting year). It is the difference between what the company owns (assets) and what it owes (liabilities).
Assets: items of monetary value that are owned by a business. Fixed assets are used for business operations and are likely to last for more than 12 months. Current assets are cash or any other liquid asset that is likely to be turned into cash within 12 months of the balance sheet date.
Liabilities: a financial obligation of a business that is required to be paid in the future. Long-term liability: are debts that are due to be reaid after 12 months. Current liability is any debt that needs to be paid within one year of the balance sheet date.
Shareholders equity or owners equity (in a business other than a limited liability company): Total assets - Total liabilities = Net assets = shareholders equity.
Share capital: The total value of capital raised from shareholders by the issue of shares.
Retained earnings: these are the profits that are not paid out in dividends, but are reinvested back into the business and used to purchase additional assets. They are no longer available as a source of liquid funds.
Depreciation: the fall in the value of fixed assets over time due to wear and tear and obsolescence. In order to calculate the value of a business more accurately, subtract depreciation from the fixed assets on the balance sheet. (It will also show up on the income statement as an expense.)
Balace sheet example. It is upside down but I will print it for you...
Questions from today's quiz...
Explain 2 ways JAC/Utopia might benefit from e-commerce.
Using Maslow's theory of motivation, examine the factors that might affect the level of motivation at Utopia.
Discuss the importance of ecological, social and economic sustainability for Utopia. (triple bottom line)
Explain how ethical implications might influence leadership and management styles.
Identify 2 possible efferent methods of production for JAC.
Rony had a question on inflation...
https://www.youtube.com/watch?v=Vi3Q1ypNw3M
Inflation: the continual rise in the level of prices in an economy. Most economists regard low and stable inflation as a prerequisite to achieving the other 3 government objectives, so it is an absolute priority for economic prosperity.
Deflation: the decrease in the level of prices in an economy.
Questions from the case study:
Explain the value of the Ansoff matrix as a strategic decision-making tool.
Using the Ansoff matrix as a framework, examine how market development in the Pacific Islands of Fiji, Samoa and New Zealand might bring competitive advantages to Utopia.
Discuss the impact of implementing ethical objectives at Utopia.
Explain the value of preparing a STEEPLE analysis for Utopia.
Explain how changes in any 2 factors on your STEEPLE analysis can impact a growth strategy.
Examine the impact that the external environment may have on Utopia's objectives and strategies.
Here is a document on all growth methods with definitions and pros and cons.
January 31: To do in class: PEST analysis and Marketing mix for Utopia.
January 24:
Vocabulary quiz.
Stakeholder profiles of the people involved.
Create a timeline of the business.
Create a SWOT analysis for the business.
January 18:
Key terms.
Descriptions of the stakeholders of the case.
SWOT analysis.
January 17:
Stakeholder analysis of yourself...
Start to look at the preseen case study UTOPIA.
1. Key terms
2. Stakeholder profiles
3. Time line for UTOPIA and JAC
January 11:
Location: The geographical position of a business. This is one of the most important and most difficult strategic decisions for any business.
Objective: Students will understand the reasons for a specific location of production.
Vocabulary:
outsourcing/subcontracting: the practice of transferring internal business activities to an external organization to reduce costs and increase productivity. Examples include; office cleaning, accounting, security.
offshoring: an extension of outsourcing which involves relocating business functions and processes overseas. This means that offshored functions can remain within the business (operating overseas) or outsourced to an overseas organization. If a business does outsource part of their operation to an overseas organization it is considered offshore outsourcing.
insourcing: the use of an organization's own people and resources to accomplish a certain function or task which would otherwise have been outsourced.
Explain the pros and cons of La Paz's location decision. What factors do you think went into the decision of locating the school in Mar Vista?
Infrastructure:
Depending on the organization, access to roads, rail, air, and waterways fro the transportation of supplies and finished goods is a critical factor. In addition, most organizations will need quality and reliable communication network systems. (internet, phone)
Target customer:
Some organizations still need to be strategically located near their customers. However, with teh increase in e-commerce this has become less of an issue for many organizations.
Labor:
Depending on the organizations access to a highly trained workforce and/or access to an inexpensive workforce could be a key factor in deciding the location of production for a business.
Land:
Access to suitable and inexpensive land is a factor to consider for many business organizations. Some organizations will want to make sure that there is room for expansion while others would prefer to be located within an urban environment.
Suppliers:
The availability of a range of local, affordable suppliers is important.
Government:
Depending on the location, local government can provide assistance and favorable laws, taxes, incentives and policies to attract a business.
Management/Owner preference:
Many businesses choose a location where they have some local knowledge or have a strong network of contacts.
Ethical issues:
Organizations that produce noise or air pollution will need to choose their lcation wisely. In addition, some organizations perfer to locate their production facilities in their local country or town in order to create jobs and stimulate the local economy.
Competitors:
In some cases, managers would like to be near their competition to draw customers to a specific area and away from their competition. In other instances, managers would prefer to be located away from their competition in order to capitalize on a new market.
Assignment: Provide a brief description of one business that is of interest to you. Using the factors above, explain why that business has decided to locate there.
January 10: Production Methods continued.
Conrad will talk to us about Cellular Production.
Vocabulary words:
Capital-intensive - Manufacturing or providing a product relies heavily on machinery and equipment. Because of this, the cost of capital accounts for the largest proportion of the capital-intensive firm's overall production costs.
Labor-intensive - In this case, the production process relies heavily on labor input, so that the cost of labor accounts fro the largest proportion of a firm's overall production costs. It is more apparent when providing personalized services.
Explain the most appropriate method of production for each product below:
a) Navy battleships
b) Wedding cakes
c) Cookies
d) Samsung smartphones
e) Evian bottled mineral water
Explain why it might not be easy to categorize the production method used to make the following products:
a) Dell personal computers that are "made to order".
b) Birthday cakes that are sold at large supermarkets such as Carrefour, Tesco and Walmart.
How does an organization's culture dictate the choice of production methods?
How has innovation changed the way things are being produced?
Why do many firms choose to use a combination of various methods of production?
Look at the CUEGIS question from last week.
January 5: Production methods
I just read about this from Adidas:
http://news.adidas.com/us/Latest-News/adidas-will-open-atlanta-based-facility--to-make-shoes-in-america/s/4d105d93-794c-4282-9382-d50032585cc1
Objective: To be able to describe and compare features and applications of the following production methods. To be able to analyze the implications for the business that arise from different production methods and finally to be able to analyze the most appropriate method of production for a given situation.
Watch: Production in a Chinese factory.
https://www.youtube.com/watch?v=9wIeJZLADcE
Job Production: Producing a one off specialty item designed for the customer.
Batch Production: Producing a limited number of identical products - each item in the batch passes through one stage of production before passing onto the next stage.
Mass Production: Producing large quanitties of a standardised product.
Mass Customization: The use of flexible computer-aided production systems to produce items that meet individual customer requirements at mass production cost levels.
Flow Production: Producing items in a continually moving process which can also be known as line production.
Cellular Production (manufacturing): Splitting flow production into self-contained groups that are responsible for whole work units.
Power point with advantages and disadvantages of each.
January 3: Look at pictures around the room and decide if they are ecological (environmental) or social sustainablility. Choose one that is negative and talk about the specific operations management strategies that are harming sustainability. Choose on that is positive and talk about the specific operations management strategies that are helping sustainability.
Sustainability: a concept that promotes intergenerational equity, example: production enables consumption of goods and services for the people of today without compromising the consumption for the people of tomorrow. It is about meeting the needs of the current generations in such a way that does not jeopardise the needs of future generations. (Paul Haong)
Ecological (Environmental) Sustainability: refers to the capacity of the natural environment to meet the needs of the current generations without jeopardizing the needs of the future generations.
http://www.elquintopoder.cl/wp-content/uploads/2012/07/jurel2.jpg
Watch:
What is Cradle to Cradle?
https://www.youtube.com/watch?v=cILWhDEuaVY
Conrad's project is a great example!
Social Sustainability: This examines social interactions and structures that are necessary for sustainable development. Social stustainability enables society to optimize the quality of life for people and their descendents. Some social barriers prevent a community from advancing: poverty, unemployment, racism and gender inequalities.
http://pro.magnumphotos.com/C.aspx?VP3=SearchResult&VBID=2K1HZO6ALY8QVS
http://www.nepalyouthfoundation.org/programs/vocational-education-career-counseling/ (green manufacturing)
Watch:
In class: P&G social responsibilities: sustainability
https://www.youtube.com/watch?v=Hy2yi7r5-Ts
Watch at home about the shipwreckers in Bangladesh.
https://www.youtube.com/watch?v=qhIaEEW63Sc
Economic Sustainability: refers to the deveopment that meets the needs of the present generation using existing available resources without compromising the ability of future generations to meet their needs. This requires production managers to consider which resources they can use more efficiently. (land, labor, capital and enterprise)
http://www.vogue.com/12083724/under-the-dome-china-air-pollution-documentary-subtitles/
https://indiagetgreenblog.com/2013/11/13/top-5-ways-to-make-product-manufacturing-greener/
Watch:
Nestle's commitment to sustainability
https://www.youtube.com/watch?v=f_LqrT5KA9g
Homework: Choose one company (hopefully your CUEGIS company) and discuss specific operations strategies that either help or harm sustainability.
With reference to one or two organizations, evaluate different operational strategies businesses can adopt to respond to issues of globalization or culture.
What are the operational strategies your company uses to control or ensure; quality, safety, sustainability, planning, research and development, method of production. First define these for your company.
Second define either globalization or culture.
How are they adapting to globalization?
How are they adapting either their internal culture or adapting to external cultures?
Jan. 2:
Objective: To understand operations management and its relationship with other business functions and how it is intregral to organizations that produce goods and/or services.
Take a moment to write down the 3 functions of business that we have already studied. Then write how you think that operations interacts with them.
Operations management or production: Providing the right goods and services in the right quantities at the right quality in a cost-effective and timely manner. This has a direct impact on other functional areas of the organization. Or as others say: it is to create the highest efficiencies in producing goods and services for the organization.
Remember the 4 sectors of the economy? Operations is a part of each one. Discuss how converting inputs into outputs and adding value happens in each of the examples below:
Primary sector: extracting raw materials, harvesting crops and rearing animals
Secondary sector: turning natural resources into processed or finished goods clothing or consumer electronics
Tertiary sector: providing services to guests in the form of finace or healthcare
Quaternary sector: universities or IT companies
Now create a mind map with your ideas with size and timing of production and planning in mind. (Have materials ready for class in order to engage and make posters for the class.)
November 23: Case study
November 18: Homework. Your first draft of your IA is due Monday Jan. 28.
November 14: Ariel wanted to further explore financial ANALYSIS:
This is a great article about how to analyze financial reports.
http://www.accountingtools.com/financial-statement-analysis
CASE STUDY today about income statements and how to analyze them.
Worked example for Rony:
i) 500
ii) 180
iii) 200
iv) 45
v) 120
I added a column on my chart and also figured out the percent change between the years.
How do you calculate percent change?
Take the difference between the two years. Then divide by the initial numbers. Then multiply by 100.
I also figured out GPM and NPM. Both of these ratios I can use to analyze a profit and loss statement.
With the percent change number I can now answer questions about the performance of the company.
Shareholders of Ahmed Educational books Ltd. may be please with the performance of the company because:
Gross Profit and Net Profit (after intrest and tax) have both increased by 11.1% and 5.2% respectively. Retained profit is going up by 10% and that is a great source of finance for the continuing growth of my business. I also have only increased my tax payment by 6.6% even though I have increased my sales, GP and NP.
On the other hand, shareholders of Ahmed Educational Books Ltd. might also have some worries about the performance of the business because:
Sales revenues increased but the Cost of Sales also has increased by the same amount. So there were no economies of scale utilized by my growing business. Dividends now are only 10% of profit after tax compared to 15% last year. This is a drop of 33.3%. There has been a new line item of debt interest of $10,000. (if you think in hundred of thousands) (This has limited my Net profit growth.) The gross profit margin has stayed at 60% even though my sales revenues are higher. The NPM has also remained at 40%.
Shareholders would also want to consider economic factors during these 2 years along with their corporate objectives, are they meeting them? They can also look at their competitors numbers.
November 8: Presentation about the SL IA
http://www.slideshare.net/theburpingspider/the-business-ia-sl
IA layout
November 1: CASE STUDY cash flow forecast
Investment: purchase of an asset with the potential to yield future financial benefits.
Capital Expenditure or CAPEX for short: the money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.
http://www.investopedia.com/video/play/what-is-capex/
Investment Appraisal: Techniques used to calculate the financial costs and benefits of an investment decision. (The different methods used to assess the risks involved in investment decision-making. The main methods of investment appraisal that we are going to study are:
Payback period: Refers to the amount of time needed to for an investment project to earn enough profit to repay the initial cost of the investment. The formula for calculating the PBP is:
PBP = Initial investment cost ($)
Contribution per month ($)
therefore it is the most used.
prone to seasonal fluctuations so the PBP can take longer than the model shows.
how long it would take for the cash to be recouped.
asset before it needs to be replaced. This can be important in the age
of technology.
looking at the short-term benefits and not the potential long term gains.
different costs by calculating the quickest PBP of each option.
property developers)
Average Rate of Return: calculates the average profit on an investment as a percentage of the amount invested.
Total profit during project's lifespan ($) / number of years of project x 100 = ARR
Initial amount invested
Because ARR is expressed as a percentage, it is easy to compare the return to other investment opportunities. (If two projects are predicted to yield the same ARR, then the relatively cheaper project might be more desirable given that it carries less financial risk.)
A weakness of ARR is that it ignores the timing of the cash inflows and therefore tends to create errors in forecasting. It also relies on the knowledge of how long a project or investment will be useful. (That might be a guess.)
http://www.inf.ed.ac.uk/teaching/courses/pi/2011_2012/resources/InvestmentAppraisalActivity.pdf
Oct. 28:
Discuss questions.
Different causes of cash flow problems:
Overtrading: When a business expands too quickly either by buying too many fixed assets before earning the money or accepting too many orders without the capacity to make the product.
Overborrowing: When a large proportion of the money raised for expansion or growth is through external sources of finance, the higher the cash outflow due to interest.
Overstocking: This means that a business holds too much stock because of ineffective stock control or belief that there will be growth that does not come.
Poor Credit Control: If a company offers their customers extended periods of credit. This makes the working cash flow cycle longer. There also could be a case where you offer businesses credit and they do not pay resulting in "bad debt".
Unforeseen changes: Unexpected change in demand for the product, machinery breakdowns, shipping issues or storms can temporarily cause cash flow issues.
Strategies used to deal with cash flow problems:
Reduce cash outflows:
Look for businesses that will give you better credit terms so that you do not have to pay immediately for their products.
Look for suppliers that offer the same quality materials for a better price.
Make sure to control your stock (inventory).
Reduce expenses. How can you reduce your overhead costs?
Lease rather than buy.
Improving cash inflows:
Tighter credit control: As a business, you can limit the credit that you give your customers.
Cash payments only. This has some drawbacks in that customers might prefer to buy from other businesses that do offer credit.
Change your pricing policy. You can cut prices in order to bring in more cash in the short term.
Improve the product portfolio. Provide a wider range of products increases sales revenue with products that complement each other. However, this requires more cash to produce the products and is not guaranteed to bring in more revenue.
Seeking alternative sources of finance:
Overdrafts
Selling fixed assets
Debt factoring
Government assistance
The above strategies are to be used for cash flow issues.
CASE STUDY
Oct. 26:
Cash Flow Forecast: A financial document that shows the expected movement of cash into and out of a business, per time period. It is based on 3 key concepts.
CASH INFLOWS: usually come from sales revenue when customers pay for the products that they have purchased. Cash inflow can also come from payments made by debtors, interest received from savings deposits, sale of fixed assets or rental income…
CASH OUTFLOWS: refers to the cash that leaves a business. (any bills that need to be paid) A cash flow forecast requires a detailed budget of expenses, which include payments to creditors, advertising, loan and interest repayments or dividends.
NET CASH FLOW: refers to the difference between cash inflows and cash outflows per time period. Ideally, net cash flow should be positive, although it is possible for a firm suffering from negative cash flow to survive temporarily.
Why do this? Banks require them. They help managers anticipate. They aid in business planning.
Start with the opening balance:
Then inflows
Total Cash Inflows
Outflows
Total Cash Outflows
Net cash flow: total cash inflow – total cash outflow
Closing balance.
CASH FLOW FORECAST
Study the cash flow forecast below to complete the missing values for a-e
Oct. 25: Go over the test.
Current Assets: the liquid resources belonging to a business that are expected to be turned into cash in the next 12 months. They are as follows:
Cash: Money that is held at the business or in the bank.
Debtors: This refers to people or other organizations that owe money to the business as they have purchased goods on credit.
Stock: This is the unsold supplies of the raw materials, work-in-progress, and finished goods.
Current Liabilities: the money that a business owes that needs to be repaid in the next twelve months.
Overdrafts: A short-term source of finance that needs to be repaid quickly because interest rates are usually high.
Creditors: Suppliers need to be repaid for items that have been purchased on trade credit.
Tax: taxes to the government are usually paid on a yearly basis.
Cash Flow Statement:
Some assumptions to start:
Cash is needed to pay for the daily running of the business. Cash is a current asset. It is the money that a business receives from a sales of goods and services.
Profit is the positive difference between sales revenue and its costs of production. When enough products are sold to pay for all the costs, the firm reaches the break-even point and anything above that point generates profits. Profit = Revenues - Costs
It is very important to understand that some businesses sell things on credit. So you can see the sales on the income statement but the cash has not come at the time of purchase. So profit is not the same as cash. Example: You sell $50,000 worth of goods in a month. 60% of your customers pay with cash so you receive $30,000 cash. The other 40% ($20,000) is not received until the end of the credit period.
Reasons for this to happen: poor credit control or profitable businesses try to expand too quickly, seasonal stresses on businesses that don't have cash at certain times of the year.
Liquidity = how easily a business can be turned into cash.
Evidence shows that insufficient cash flow is the single largest form of business failure. (not lack of profitability)
So CASH IS KING!
Objective: Students will understand the relationship between investment, profit and cash flow. Define working capital and explain the working capital cycle. Be able to prepare a cash flow forecast from given information and evaluate strategies for dealing with liquidity problems.
Working Cash Cycle: The interval between cash payments for costs of production and cash receipts from customers.
Creditors: A person or company to whom money is owed. Using cash or credit, the business purchases raw materials from suppliers. Purchasing supplies on credit gives a business some time to complete the next steps in the cycle without running out of cash.
Stock: Raw materials are then converted to stock through production. Also known as inventory.
Debtors: A person or company that owes a sum of money. Products are sold to customers. This can be done in cash but also done on credit.
Homework. Read the articles and answer two of the questions below.
http://www.businessinsider.com/groupon-cash-flow-positive-2011-6
http://www.bloomberg.com/news/articles/2013-10-24/same-old-amazon-all-sales-no-profit
https://www.thebalance.com/negative-working-capital-on-the-balance-sheet-357287
1. Suggest where investment, cash flow, and profit would fit in our working capital cycle diagram.
2. Draw a new diagram to illustrate the relationship between investment, cash flow, and profit.
3. Analyze the relationship between investment, cash flow and profit for a specific business. (example: Amazon)
4. Comment on Amazon's strategy to minimize the length of their working capital cycle. Explain the advantages and disadvantages of this approach.
5. Identify a business that has a longer working capital cycle than Amazon. Explain the impact a longer working capital cycle has on the organization's ability to meet short-term financial obligations.
6. Explain the working capital cycle in terms of capital expenditure versus revenue expenditures. How do these different expenditures show up in our working capital diagram?
7. Compare and contrast three measures of liquidity - working capital, current ratio, and acid test.
8. Compare and contrast two measures of business success - profit and cash flow.
Oct. 18:
You teach me what you learned on Friday. Go over uses and limitations of financial ratios.
Go over uses and limitations of financial ratios.
Ratio analysis provides very useful data for many stakeholders that have an interest in the financial performance. USES
Ratio analysis also has some LIMITATIONS**.
EXAM TIP: Often in ratio analysis questions it is more important to consider what data are not given rather than just to examine the financial data provided. Good management decision-making considers a range of information, both quantitative and qualitative.
Different ways of using ratios:
Historical performance: same ratios compared year over year to see what are the trends.
Inter-firm comparisons: close rivals should be looked at to see the performance in the same market.
Nature of the business and the organizational objectives: for-profit companies have very different ratios than non-profit companies. Also firms that prioritize their social and ethical footprint might have lower profitability ratios.
The economy: make sure to know what the larger economy is doing as a company can still be performing efficiently but there is a change in the health of the economy.
Talk about IAs. Show me your research for your IAs.
Test on Friday over Balance sheet, Income Statement, Ratios.
Oct. 14: Ratio Analysis:
Purpose:
- to see what a firm's financial position is: its short and long term liquidity.
- assess a firm's financial performance. (it's ability to control expenses)
- compare actual figures with projected figures
- for strategy decisions
- aid decision-making
Ratios are compared in 2 ways:Exam tip! When learning the different financial ratios, make sure that you understand the unit of measurement used. Make sure to not only know the formula but to also understand the meaning of the ratio used!
Profitability Ratios: Examine profit in relation to other figures. These numbers are interesting to managers, developers and investors because they show how well a firm has performed in financial terms.
Net Profit x 100 = Net Profit Margin
Sales Revenue
This shows the percentage of sales turnover that is turned into net profit. A NPM ratio of 35% means that for every $100 of sales $35 is the net profit. This is the amount of profit that is left after all the production costs are accounted for.
How can you improve NPM?
Gross Profit Margin x 100 = Gross Profit Margin
Sales Revenue
The gross profit margin shows the value of gross profit as a percentage of sales revenue. This is expressed as a percentage. The higher GPM, the better it is for a business as gross profit goes towards paying its expenses.
How can you increase gross margin?
Efficiency Ratios: Show how well a firm's resources have been used, such as the amount of profit generated from the available capital used by the business.
Return on capital employed:
Net profit before interest and tax x 100
Capital employed
Capital employed = loan capital + share capital + retained profit
(loan capital is shown as long-term liabilities on the balance sheet)
Liquidity Ratios: look at the ability of a firm to pay its short term liabilities (how easy it is to pay off their debts). This helps banks and creditors assess the likelihood of getting their money that they are owed.
Current ratio: This pertains to a firm's liquid assets and short-term liabilities: it's working capital.
Current Assets
Current Liabilities
As Ariel taught us last week, current ratios that are within 1.5-2.0 are desirable.
Acid test ratio: is similar to the current ratio except it ignores stock when measuring the short-term liquidity of a business
Current Assets - Stock
Current Liabilities
Look at these businesses and find the different ratios in order to analyze the business.
Chipotle/Qudoba
And if there is time: Best Buy
Oct. 11:
Objective: Continue to look at balance sheets and understand how to read them and use the information to make an informed investor decision.
Balance sheet example for the IB Test (I realize it is upside down. I can't figure out how to make it right side up.)
Exam tip:
The main difference between the balance sheet of incorporated and unincorporated businesses is that share capital does not appear as part of their equity because the latter does not have shareholders. The majority of the examination questions will ask you to interpret the balance sheet of a limited liability company.
Limitations of balance sheets:
The balance sheet is a static document so can change from quarter to quarter due to normal business activity.
The figures are "book value" of the assets and sometimes the "market value" is different. There is not a clear breakdown of the companies assets so the information is not totally transparent.
Not all balance sheets look the same so sometimes it is difficult to compare companies even in the same market.
Intangible assets: Non-physical fixed assets that have the ability to earn revenue for a business.
Brand recognition and brand value. These help a company make money and therefore are an asset.
Patents: These provide legal protection for inventors, preventing others from copying their creation for a fixed number of years.
Copyright: These provide legal protection for the original artistic work of the creator. Anyone that wants to reproduce or modify the artist's work must first seek permission.
Goodwill: This is the value of an organization's image and reputation. This is the sum of customer and staff loyalty and can provide a major completive edge for any business.
Goodwill is an indefinite-lived intangible asset recorded on the acquirer's post-combination balance sheet that is not amortized but, rather, tested periodically for impairment. If the acquirer later writes down impaired goodwill, it is usually a sign that the business combination failed to meet expectations (e.g. Time Warner's troubled acquisition of AOL) and, consequently, implies overpayment for the acquired business and error in judgment by the acquirer.
http://macabacus.com/accounting/purchase-price-allocation1
Registered Trademarks: distinctive signs that uniquely identify a brand, product or business.
Intangible assets do add value to the business, but there is uncertainty in how to place an accurate value on these assets.
Activity: Analyze Chipotle to see if it is a good investment.
http://ir.chipotle.com/phoenix.zhtml?c=194775&p=irol-newsArticle&ID=2187323
Oct. 7:
Objective: Students will be able to define, read and start to analyze a balance sheet of a publicly traded company.
Key terms
Balance Sheet: A document that records what the business is worth at one point in time. (it shows the balances of the various accounts on the last day of the reporting period) Assets are shown on top and liabilities on the bottom.
Assets: Items of monetary value that are owned by a business.
Current Assets: An item on the balance sheet that is either cash, a cash equivalent, or which can be converted to cash in one year.
Fixed Assets: An item on the balance sheet that cannot be converted into cash easily - most notably a company's property, factories, and equipment.
Liabilities: A financial obligation of a business that is required to pay in the future.
Assets = Equity + Liabilities
Shareholders' equity: Total value of assets less total value of liabilities.
Share Capital: The total value of capital raised from shareholders by the issue of shares.
Working Capital: The capital of a business that is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities.
Khan academy videos about balance sheets and the connection to the income statement.
https://www.youtube.com/watch?v=mxsYHiDVNlk
Oct. 4:
Objective: Students will be able to define, read and start to analyze income statements of a publicly traded company.
Apple Inc. and their P&L statement. Go to page 43 of this document.
http://files.shareholder.com/downloads/AAPL/2908969544x0xS1193125%2D11%2D282113/320193/filing.pdf
What things are listed on this income statement? Why would they be important to the different stakeholders? (Investors, employees, management, suppliers, potential investors, competitors, etc.)
Pandora
http://www.ibtimes.com/spotify-vs-pandora-who-will-reign-over-us-market-299035 Conrad
http://dealbook.nytimes.com/2011/06/14/pandora-prices-its-i-p-o-at-16/?_r=0 Rony
http://press.pandora.com/phoenix.zhtml?c=251764&p=irol-overview and
http://computer.howstuffworks.com/internet/basics/pandora.htm
Ariel
http://www.intelfreepress.com/news/revolutionizing-the-radio-business-pandora-s-tim-westergren-on-the-next-big-thing/73/ Josue
Keivan read the letter from the CEO on Pandora Music's annual report. The PDF is online.
Look at page 51 of Pandora Music's annual report from 2012.
https://www.sec.gov/Archives/edgar/data/1230276/000119312512120024/d280023d10k.htm
Would you invest in this company? Which lines on the report are you looking at? Decide what evidence brings you to the conclusion to buy the stock or to not buy the stock.
Homework:
Bring in an income statement and a balance sheet from the annual report or their 10-K of a company that you would like to study.
Usefulness of the income statement: Used to compare and measure the performance of a business over time. This statement will help us with ratios in a couple of weeks. Actual data can then be compared with planned data. Investors and banks look at these numbers in order to decide whether or not to invest in a company.
Sept. 26: Breakeven analysis case study.
Financial Accounts
Objective: Students will be able to define, read and analyze income statements of a publicly traded company.
Language objective: Income Statement (Profit and Loss Account), Profit, Gross Profit, Cost of Goods Sold, Net Profit
Profit and Loss Account: This statement shows the trading position of a business throughout a period of time.
Balance Sheet: Shows the assets and liabilities of a business at a particular point in time.
Opening activity: One minute question:
Nestlé is the world's largest food company, founded by Henri Nestlé in 1866. Many of the Swiss company's brands are internationally renowned, such as Kit Kat and Smarties (candy), Dreyer's (ice cream), Nescafé, Nestea and Perrier (beverages), Gerber (baby food products), and Maggi (seasonings and sauces). A huge proportion of Nestlé's revenues come from the sale of candy, a market also dominated by rivals such as Mars (with brands such as Snickers and M&Ms) and Cadbury's (which own brands such as Time Out, Créme Eggs and Dairy Milk). Nestlé is listed on the Swiss stock exchange in Zurich and employs more than 339,000 people worldwide. Since 1974, Nestlé has owned a large share in L'Oreal, the world's largest cosmetics company. (case study from Business Management, Paul Hoang)
5 objectives of the Association of Chartered Certified Accountants:
Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional Behavior
Profit and Loss Account: Main objective when using this tool is to see the profit and loss of a business during a particular trading period.
Tim Bennett explains profit and P&L account:
https://www.youtube.com/watch?v=IQuYnADhuwo
Now we are going to look at Apple Inc. and their P&L statement. Go to page 43 of this document.
http://files.shareholder.com/downloads/AAPL/2908969544x0xS1193125%2D11%2D282113/320193/filing.pdf
What things are listed on this income statement? Why would they be important to the different stakeholders?
Sept. 20: Break-even analysis
It will be important for us to address the following limitations of break-even analysis whenever we apply it:
Sept. 16:
Video about Fixed and Variable Costs
https://www.youtube.com/watch?v=nQ5APwtB-ig
TC = FC + VC (Total Cost = Fixed Cost + Variable Cost)
Variable Cost = AVC (Average Variable Cost)
Quantity (Q)
Fixed Cost = AFC (Average Fixed Cost)
Quantity
Total Cost = ATC (Average Total Cost)
Quantity
Now we will answer some questions about Costs:
Revenues
Scales
Whereas money going out of the business is considered costs or expenses, money coming into the business is considered revenue. There are many different terms used to describe revenue (e.g. sales, sales revenue, sales turnover, and operational income), but businessdictionary.com defines revenue as:'The income generated from the sale of goods or services, or any other use of capital or assets, associated with the main operations of an organization before any costs or expenses are deducted. Revenue is shown usually as the top item in an income (profit and loss) statement from which all charges, costs, and expenses are subtracted to arrive at net income.' Source Businessdictionary.com
Revenue consists of cash and credit transactions and is recorded on the date the item was sold. In other words, revenue is recognized when the income is earned and not when it is received. Revenue for a given period of time is generally calculated through the following formula:
Revenue = Price X Quantity Sold
A visual representation would look a lot like the variable cost graph. It would start from the origin, because without any products being sold, there is no revenue. The main difference is that the total revenue line would be stepper than the variable cost line. This is because the business would charge a price higher than the variable cost per unit.
Of course, organizations often sell multiple products at different prices, but this simple formula and graph is an important one to keep in mind to understand revenue and will be used when we cover break-even analysis later in the week.
Video showing Apple's revenue.
https://www.youtube.com/watch?v=nZ6webaJaTo
TEST TIP:
Remember that Revenue is not the same thing as profit nor is it the same thing as Cash.
There can be many different revenue streams:
Read this article.
http://www.businessinsider.com/airlines-expect-best-profits-ever-in-2014-2013-12
You can also look at other articles if needed.
Then:
Answer the following questions using appropriate business terminology (e.g. direct/indirect costs, variable/fixed costs, revenue, etc.).
Sept. 14:
Conrad will present Mergers and Acquisitions
Introduction
Our first finance topic, 3.1 sources of finance, covered the various ways finance can be raised to cover expenditures. As you recall, some of the sources of finance were more appropriate for long-term expenses or capital expenditures (e.g. share and loan capital) while other sources of finance were more appropriate for short-term expenses or revenue expenditures (e.g. overdraft and trade credit).Beginning with this lesson, we start the next finance topic - 3.2 costs and revenues. Specifically, we will look more closely at the different types of costs businesses face.
We will classify the different types of costs faced by businesses. Specifically, we will categorize costs in two ways depending on if the costs vary directly with:
- The level of output (i.e. level of products produced and sold)
- The output level of a specific product or a department
The first way of categorizing costs leads to three distinct types - fixed, variable and semi-variable costs. It is helpful to categorize costs in this manner when performing break-even analysis, which we will learn about later this week.Fixed Costs:
Fixed costs can be depicted visually by the graph displayed above.
Businessdictionary.com states that fixed costs are:
‘While in practice, all costs vary over time and no cost is a purely fixed cost, the concept of fixed costs is necessary in short term cost accounting. Organizations with high fixed costs are significantly different from those with high variable costs. This difference affects the financial structure of the organization as well as its pricing and profits.‘
Variable Costs
Variable costs can be depicted visually by the above graph.
Businessdictionary.com states that variable costs are:
‘A periodic cost that varies in step with the output or the sales revenue of a company.
Companies with high variable costs are significantly different from those with high fixed costs. This difference affects the financial structure of the company as well as its pricing and profits‘
Semi-Variable Cost
Businessdictionary.com states that semi-variable costs are:
‘Production cost (1) that remains fixed up to a certain volume, after which it becomes variable, (2) the total of which responds less than proportionately to changes in volume of activity, or (3) which has both a fixed cost element (such as monthly rental for a phone line) and a variable cost element.
In reality, most costs have both a fixed and variable element, thus making them semi-variable. Semi-variable costs are more difficult to depict visually, but one interpretation is shown above.
The second way of categorizing costs leads to two distinct types of costs - direct and indirect (or overheads) costs. It is helpful to categorize costs in this manner when preparing financial accounts (e.g. the profit and loss account), which we will cover later in this unit.
Direct Costs:
Businessdictionary.com states that direct costs are:
‘An expense that can be traced directly to (or identified with) a specific cost center or cost object such as a department, process, or product.
Direct costs are often variable costs, but not always. For example, raw materials used to make a specific product would be both a variable cost and a direct cost. In contrast, the salary of a human resources manager would be considered a fixed cost, as it does not vary in the short term. However, it would be considered a direct cost because it can be traced directly to the human resources department.‘
Indirect Costs:
Businessdictionary.com states that indirect costs (or overheads) are:
‘An expense (such as for advertising, computing, maintenance, security, supervision) incurred in joint usage and, therefore, difficult to assign to or identify with a specific cost object or cost center (department, function, program). Indirect costs are usually constant for a wide range of output, and are grouped under fixed costs.
Since it is often difficult to reduce costs directly related to the production of a product, overheads can be under great scrutiny from cost-conscious businesses.‘
Exercise:
Suggest one example of a business cost (e.g. salaries, rent, utilities, raw materials, loan payments, taxes, etc.) that fit each of the following classifications. Make sure to include your reasoning.
Sept. 13:
https://ibmastery.mykajabi.com/blog/master-the-business-and-management-extended-essay-in-three-easy-steps
Josue will present his Marketing Mix lesson plan.
Long term sources of external finance
- Share capital (This includes venture capital and business angels)
- Debentures
- Long-term loans (mortgages)
- Grants and government subsidies
Medium term sources of finance- Leasing
- Medium-term loan
Short-term sources of financeWhat is Venture Capital
http://www.investopedia.com/video/play/venture-capital/
6 factors influencing the choice of financing:
What will the money be used for? (This will affect the time frame in which the financing is required.)
The Cost of finance: Interest, opportunity cost, the expense that the business will incur marketing the share or bond sales.
Legal structure and desire to retain control of the company.
Size of existing borrowing. If a company has already borrowed large sums of money, investors get nervous about loaning them more.
Amount Required
Flexibility. If it is a seasonal business and there is the ability to use more flexible sources of finance it is better than being locked into long-term loans.
EXAM TIPS
Do not assume that all profitable businesses have cash on hand to fund future projects. Sometimes profits have already been used for other upgrades or might be owed to banks or shareholders in that moment.
Do not make the mistake of suggesting that selling shares is an internal form of internal finance. Although the shareholders own the business, the company is a separate legal entity and therefore the shareholders are outside of the company.
Crowdfunding (example Kickstarter) It is a source of finance where you raise money through small donations by large amounts of people on the internet. You can also to get invaluable feedback on your product.
Types of Costs
Remember that Cost refers to the cost of production. Price is the amount that the product is sold for.
Fixed Costs
Variable Costs
Semi-Variable Costs
Direct Costs
Indirect Costs
Sept. 6:
Discuss article and discuss sources of finance found in the text.
Elon Musk and Tesla's bid to buy Solar City.
http://www.wsj.com/articles/elon-musk-faces-cash-squeeze-at-tesla-solarcity-1472687133
Keivan will discuss e-commerce.
https://docs.google.com/presentation/d/19MBCl1yYvunUj2mtH1Q8UnneVz9313P_9MNoVhjV2EY/edit?ts=57ce16f6#slide=id.g16f6834e82_0_153
Finalize sources of finance discussion and take Sources of Finance Scenario test.
There will be scenarios that will explain the type of company and the why they need the money. You will need to tell me what source of finance you would recommend and why.
Sept. 2: Ansoff Matrix: Rony's presentation
https://docs.google.com/presentation/d/1ltXlwCv5n9_9pA253XG-6IVKF0pJ7QhVG1g3qsN9HFQ/edit?ts=57c8e4e8#slide=id.p
August 31:
Have you heard the phrase ‘It takes money to make money.’? The first aspect of finance we will consider is the different ways businesses can acquire finance to run their business. There is a list of various sources of finance that is located below that we will need to become familiar with. This is the goal of the google docs activity that we will do today.
You will also need to be able to determine which source of finance is best for a given situation. This will require you to consider the specific circumstances of the situation and relate it to the advantages and disadvantages of the different sources of finance. The discussion activity which you will complete will outline how we will help each other develop this skill.
For this activity, we are going to pool our collective genius and complete a google presentation as a class by following the instructions below.
Choose three of the following sources of finance or one of the expenditures from the following list:
Capital Expenditure
Revenue Expenditure
We will create a google slide share about these terms. With your term you must include:
Short term finance-This is for any kind of finance that needs to be repaid within a year. (12 months)
Medium term finance- This needs to be repaid within the timeframe of 12 months and 5 years.
Long term finance- This type of finance refers to any period of five years or longer. (Long term loans, debentures.)
These are some articles that you can use.
http://smallbusiness.chron.com/sources-finance-advantages-disadvantages-14407.html
Geared towards small business owners, this article provides the advantages and disadvantages of personal savings/funds, investors, bank loans, and government grants and loans.
http://www.tutor2u.net/business/gcse/finance_choosing_right_sources.htm
http://www.tutor2u.net/blog/index.php/business-studies/comments/sources-of-finance-flashcards
http://tutor2u.net/business/finance/raising_finance_intro.htm
http://tutor2u.net/business/finance/finance_sources_smes.htm
Helpful information on sources of finance including descriptions of various sources, how to choose the right source, and flashcards.
http://www.bized.co.uk/learn/accounting/financial/sources/index.htm
http://www.bized.co.uk/virtual/bank/business/finance/sources/theories.htm
A description of the various sources of finance including the differences between internal and external sources, and tips on how to decide which source is best.
http://www.economywatch.com/finance/sources-of-finance.html
a description of sources of finance in terms of ownership.
http://www.fao.org/docrep/w4343e/w4343e08.htm
From the Food and Agricultural Organization of the United Nations a detailed description of various sources of finance.
http://businesscasestudies.co.uk/business-theory/finance/sources-of-finance.html#axzz2vDowvciC
a shorter description of the various sources of finance.
http://articles.bplans.com/how-to-get-your-business-funded/
this article is great to know which source of finance is adequate for different types of businesses.
http://www.investopedia.com/terms/f/financing.asp
A basic yet informative definition of financing.
Dates for teaching experience
Rony: Sept. 2 Ansoff Matrix
Keivan: Sept. 6 e-commerce
Josue: Sept. 9 SWOT/PEST
Ariel: Sept. 7 HR Theory
Conrad: Sept. 12
August 30:
Review and prepare for IA:
Choose a tool or theory that we learned about last year that you believe that you will use in your IA and prepare a short lesson plan for the class.
Content objective: The other students in the class will be able to use your tool in the correct manner when preparing strategy for future decisions.
Language objective: During your lesson, the other students will read, write and speak with other students about the tool.
Will have a visual for the other classmates to see and use.
Will have a check for understanding at the end of the class.
Today I will teach about mission and vision statements.
Vocabulary objective:
Mission Statement: A simple declaration of the underlying purpose of an organization's existence and its core values. (What is our business?)
Vision Statement: An outline of an organization's aspirations (where it wants to be) in the distant future.
Look at the Vision and Mission Statements that have been posted around the room. Please get up and read them.
Choose one that resonates with you.
Write: Why did you choose this mission/vision statement? What words stood out to you in the text? Why?
Talk about your ideas with your partner. Then we will share as a class.
Do you think that the existence of a mission statement or visions statement influences your company's performance? If so, why?
Now think of your favorite company/brand. What is their mission statement? Is the company guided by their mission statement? Why or why not? What is your proof?
1st-trimester syllabus